The economics of empire: two books examine how U.S. foreign policy and international money manipulators are placing the United States and myriad other countries on the road to financial disaster.

Empire of Debt: The Rise of an Epic Financial Crisis, by Bill Bonner and Addison Wiggin, Hoboken, New Jersey: John Wiley & Sons, 2006, 370 pages, hardcover, $27.95.

Confessions of an Economic Hit Man, by John Perkins, New York: Plume, 2004 (2006 paperback ed.), 303 pages, $15.00.

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In our nation's robust republican youth, our currency was backed by precious metals, and our foreign policy was designed to promote and protect our national interests, while minimizing entanglements in the affairs of other nations. Today, the dollar is a flat currency backed only by the "full faith and credit" of the U.S. federal government, which in practice, regrettably, amounts to nothing more than force and fraud. And our foreign policy dictates endless involvement in nearly every existing conflict anywhere on the face of the globe.

In Empire of Debt, Bill Bonner and Addison Wiggin, the financial analysts who publish the Daily Reckoning newsletter, document how our nation has sacrificed our republican patrimony in favor of the imperial course that has led so many previous world powers into penury.

The wise and far-sighted men who founded our republic understood that it is impossible to have an imperial foreign policy without an inflatable currency. That's why the Constitution is based on what could be called hard law and hard currency. The foundational fraud of our post-1913 imperial system is the dollar itself, an elaborately decorated scrap of paper that has been entirely decoupled from precious metals and is treated as legal tender only because the government requires people to accept it as such. Bonner and Wiggin note that the creation of the Federal Reserve System, which is essentially the ruling elite's counterfeiting arm, was a necessary overture to our nation's formal initiation into imperial power politics--the decision to intervene in World War I.

The first term of Woodrow Wilson, whom the authors describe as a sanctimonious megalomaniac "so full of good intentions he could pave the road to hell all by himself," produced two other important elements of the imperial system: the 16th Amendment, which imposed the income tax; and the 17th, which provided for senators to be directly elected, rather than being chosen by state governments to protect their interests against the federal government.

"Taken together," write Bonner and Wiggin, "the Sixteenth and Seventeenth Amendments greatly increased the power of the central government. The original constitutional system involved taxing power at the state level, with revenues submitted to the federal government for the funding of common needs (raising an army, protecting the coast, printing money). Since 1913, the process has been completely reversed. The federal government now collects most of the money from the income tax, and then doles out the revenue to the individual states, usually with many provisos, dictates, and commands attached. This allows the central government to exert great influence over state funding and in many areas not mentioned in the Constitution."

Debt and Deceit

In our constitutional republic, the central government was the agent of the states that created it; today, the states are administrative units of the central government, which has assumed the role of administering the affairs of the entire world.

In order to fund those grandiose designs, Washington is not content to plunder the existing wealth of its living subjects, but is also making debtors of generations yet unborn through the deficit spending made possible through the Federal Reserve's fiat currency system. And this intergenerational larceny has a tangible impact on the living, since the ever-inflatable dollar has lost at least 95 percent of its value since the Fed was created in 1913. Commenting on the antics of our ruling class, both foreign and domestic, over the past century, the authors write: "It was as if the United States wanted to destroy itself--first by bankrupting its economy, and second by creating enemies all over the globe."

Unfortunately, most Americans have been willing to become party, to the deceptions on which this system depends.

"In America, all the restraints, inhibitions, and modesty of the Old Republic have been blown away by the prevailing winds of the new empire," write Bonner and Wiggin. "In their place has emerged a vainglorious system of conceit, deceit. debt, and delusion.... Americans believe they can get rich by spending someone else's money." "They believe that foreign countries actually want to be invaded and taken over. They believe they can run up debt forever, and that their debt-laden houses are as good as money in the bank."

Yet there is still hope, because the framework for the Old Republic--our matchless Constitution--is still largely intact. For the hope to be realized, however, we must immediately abandon the follies of empire and once again recognize that there's no such thing as a free lunch.

Imperial Hit Men

Bonner and Wiggin explain how imperial economics and politics took root in our government, and the damage they are inflicting on our nation. John Perkins, author of Confessions of an Economic Hit Man, describes in ugly but riveting detail how that empire is administered. Perkins, a soft leftist of a vaguely New Age hue, refers to the empire as a "Corporatocracy"--an awkward but serviceable title for the clique of politicians, bureaucrats, and bankers who compose the ruling power elite.

As a young college graduate in the late 1960s seeking to avoid the Vietnam draft, Perkins took an assessment exam to work with the National Security Agency (NSA), "the nation's least-known--and largest--spy organization." Shortly thereafter he signed up for a stint with the Peace Corps in Ecuador, where he met a talent scout for Chas. T Main, Inc. (MAIN), a Massachusetts-based consulting firm. Although MAIN described itself as an engineering firm, its primary client was the World Bank, for which the company's economists would conduct "feasibility studies." A study of that sort is actually a charade: no country was ever too poor to qualify for a U.S. taxpayer-guaranteed loan from the World Bank, or a cooperating federal agency, such as the Agency for International Development.

After being hired by MAIN in 1971, Perkins was assigned a mentor who explained that "her assignment was to mold me into an economic hit man." "No one can know about your involvement--not even your wife," Perkins was told. "Once you're in, you're in for life."

Economic Hit Men, or EHMs, "are an elite group of men and women who utilize international financial organizations to foment conditions that make other nations subservient to the corporatocracy," writes Perkins. "Like our counterparts in the Mafia, EHMs offer favors. These take the form of loans to develop infrastructure," which is to be built by companies that are part of the corporatocracy's cartel (Halliburton being perhaps the definitive contemporary example). "Despite the fact that the money is returned almost immediately to corporations that are members of the corporatocracy (the creditor), the recipient country is required to pay it all back, principal plus interest."

Although the corporate interests involved in this arrangement profit handsomely, the greatest benefit accrues to the international lenders who hold the paper on the debts contracted through this process. Most lenders aren't interested in debtors who pay off their debts, but rather who make payments in perpetuity. The financial interests behind the EHMs deliberately entice resource-rich Third World governments into "a web of debt that ensures their loyalty."

"If an EHM is completely successful, the loans are so large that the debtor is forced to default on its payments after a few years," writes Perkins. "When that happens, then like the Mafia we demand our pound of flesh. This often includes one or more of the following: control over United Nations votes, the installation of military bases, or access to precious resources such as oil.... Of course the debtor still owes us money--and another country is added to our global empire."

The power elite controls assets even more fearsome than EHMs, of course. If the EHMs fail, "an even more sinister breed steps in, ones we EHMs refer to as the jackals.... When they emerge, heads of state are overthrown or die in violent "accidents.' And if by chance the jackals fail, as they failed in Afghanistan and Iraq, then the old models resurface. When the jackals fail, young Americans are sent in to kill and die."

The Way Out

Perkins offers several case studies drawn from his decades in that loathsome line of work, and describes how he eventually decided to detect from the ranks of the EHM. Of particular interest is his description of the "petro-dollar" partnership forged between the United States and Saudi Arabia in the mid-1970s, through which the Saudis received military hardware and training in exchange for a promise to continue selling its oil exclusively in dollars. It is the Saudis' willingness to accept dollars in exchange for the world's most important commodity that has ensured the dollar's continued viability; were the petro-dollar to be supplanted by another currency, the Chinese and others who have been willing to buy our Treasury debt would abandon the greenback in a hurry, with potentially apocalyptic consequences for our economy.

Like Bonnet and Wiggin, Perkins warns that the imperial course inevitably leads to disaster. "Empires never last. Every one of them has failed terribly. They destroy many cultures as they race toward greater domination, and then they themselves fall."

Perkins, it should be repeated, is a man of the left, and his opinions often reflect this. But in an interview with THE NEW AMERICAN several months ago, he explained he shares much of our view about the origins and nature of the power elite, and wholeheartedly endorses the same solution to our predicament.

"What we have to do is educate the public about the Declaration of Independence and the U.S. Constitution, and teach them to take it seriously," he said. "Then we have to hold our Congress and other elected leaders accountable to govern according to those standards. If this were the case right now, we wouldn't be building this corrupt and self-destructive empire. There would be no Economic Hit Men sowing poverty, misery, and warfare around the world. Everyone would be freer and more prosperous. That different world is possible, and it's worth working for."